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Thyrocare: Changing Healthcare Future with PharmEasy?

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(A) About Thyrocare Technologies

Thyrocare Technologies Ltd (TTL) established India's first fully automated diagnostic laboratory. It specialises in cost-effective pathological biochemical testing. Its Corporate Office is located in Navi Mumbai.

In 1996: Thyrocare was founded with focus on thyroid testing and to provide quality reports to the patients at the most competitive rates. With the passage of time the Company grew its capacity of operations from time to time. Currently, in its Laboratory over 1,00,000 specimens and over 4,00,000 Clinical Chemistry investigations are processed per night. In 2018 In September / October 2018, the Company bought back a total number of 9,58,900 equity shares at an average price of Rs 657/- per share. Further, in 2021 PharmEasy parent API Holdings acquired a 66.1% stake in Thyrocare Technologies Ltd.

Thyrocare operates with a Centralized Processing Laboratory (CPL) in Mumbai - India for esoteric tests; and Regional Processing Laboratory in major metro cities of India and other parts of Asia.

Additionally, many laboratories and hospital brands in India, Middle East and South East Asian countries, use Thyrocare to complete their menu and deliver quality at an affordable cost.

(B) Shareholding Pattern - Thyrocare Technologies

Thyrocare Technologies shareholding pattern
Thyrocare Technologies more than 1 % shareholdings

C) Acquisition by PharmEasy


During FY22 Online pharmacy startup PharmEasy acquired Thyrocare Technologies. PharmEasy, was founded in 2014 by Dharmil Sheth and Dhaval Shah, both in their early 30s. Dr Dhaval Shah holds an MBBS degree from Rajiv Gandhi Government Medical College. Further, he also has as an MBA degree from XLRI Jamshedpur. Prior to launching PharmEasy, Dhaval worked with McKinsey & Company for 2 years as a consultant. Mr Sharmil Sheth has done engineering from KJ Somaiya College of Engineering and also has a MBA degree from the Institute of Management Technology, Ghaziabad.

Further, PharmEasy offers 1 lakh+ medicines and health products across various categories through its retail partners. These partners are spread across the country. Consumers can simply place an order on their website/app and medicines are delivered to the consumer. 

PharmEasy did this acquisition in order to add diagnostic services in its digital offerings through biochemistry/pathology business. Subsequently, PharmEasy’s parent company API Holdings signed a definitive agreement to acquire a 66.1% stake in Thyrocare for Rs 4,550 Crore.

Currently, the Docon Technologies (partner in the acquisition), a 100% subsidiary of API Holdings holds 71.18% shares in Thyrocare Technologies as on 31-Dec-21. Further, API Group is India’s largest digital healthcare platform (based on GMV of products and services sold for the year ended March 31, 2021)

D) Board of Directors of Thyrocare Technologies Ltd

Mr Dharmil Nirupam Sheth was appointed on the Board of the Company as an Additional Director wef 02-Sept-21. Mr Dharmil is the co-founder of API Holdings Pvt Ltd. Further, he has done Bachelor's degree in Engineering from KJ Somaiya College of Engineering. He has also done post graduate diploma in Management from IMT Ghaziabad.

Further, Mr Dhaval Rajesh Shah was appointed as the Additional Director wef 06-Oct-21. Mr Dhaval is also co-founder of API Holdings Pvt Ltd. He holds a post graduate diploma in management from XLRI, Xavier School of Management, Jashedpur.

Further, w.e.f May 2022 Mr Rahul Guha will be the company's Managing Director and Chief Executive Officer of the Company. He is a graduate of IIM-B. He has joined API Group to head its Diagnostics Business. Rahul. Also, he has spent almost 17 years at Boston Consulting Group (BCG) where he has led the Health Care & Life Sciences practice.

Dr. A. Velumani, previous Managing Director & CEO , A. Sundararaju previous Executive Director & CFO and Amruta Velumani previous Non-Executive Director, all 3 resigned from the board of the Company wef 02-Sept-21.

E) Business of Thyrocare Technologies Ltd

Thyrocare is one of the leading pan-India diagnostic chains that conducts an array of medical diagnostic tests and profiles of tests that center on early detection and management of disorders and diseases.

As of March 31, 2021, Thyrocare Technologies offered 279 tests and 79 profiles of tests to detect a number of disorders, including thyroid disorders, growth disorders, metabolism disorders, autoimmunity,
diabetes, anemia, cardiovascular disorders, infertility and various infectious diseases. Moreover, its profiles of tests include 34 profiles of tests administered under its “Aarogyam” brand, which offers patients a suite of wellness and preventive health care tests.

Further, the Company primarily operate its testing services through a fully-automated Centralised Processing Laboratory (the “CPL”) and have expanded our operations to include a network of Regional Processing Laboratories (the “RPLs”).

Its CPL is located in Navi Mumbai. Further, the Company's CPL is has automated systems, diagnostic testing instruments and processes from leading international and Indian healthcare brands.

Thyrocare commenced setting up RPLs in 2014 and currently operate 14 RPLs, one in each of New Delhi, Coimbatore, Hyderabad, Kolkata, Bangalore, Bhopal, Mumbai, Patna, Pune, Bhubaneshwar, Cochin, Lucknow, Gurgaon and Chennai. These RPLs processes samples sourced from their respective regions.

Collection of Samples

Thyrocare Technologies collects samples through a pan-India network of authorized service providers comprised of Thyrocare Service Providers (TSPs), Thyrocare Aggregators (TAGs) and Online Clients
(OLCs). These in turn source these samples from local hospitals, laboratories, diagnostic centers, nursing homes, clinics and doctors that avail diagnostic services from Thyrocare.

As of March 31, 2021, the Company had a network of about 4,500 service providers, comprised of TSPs, TAGs, OLCs, HVCs spread across more than 250 districts covering all the states within the country.

Further, Company's wide spread network of authorized service providers has enabled us to expand the reach of the CPL, RPLs and ZPLs, thereby providing us with access to a larger customer base.

Asset Light Model : Thyrocare Technologies

Thyrocare has a differentiated business model with clinical biochemistry at its core. Firstly, it has a strong focus on limited menu of preventive and wellness tests (under the Aarogyam brand). Also, it operates an asset-light, scalable, franchisee-led model with centralized IT enabled laboratory. Thus, such model ensures cost-efficient testing at a quick turnaround. Moreover, given the fact that it is the leader in preventive care diagnostic test offerings with ‘Aarogyam’ brand and recognizes the growth opportunity in this segment, it is well-positioned to leverage its expertise and brand. Company's focus is on increasing its volumes at affordable costs.

Network of franchise partners and authorized service providers

Thyrocare Technologies Ltd has a well-established network of franchise partners and authorized service providers.

Further, as on 31-Mar-21, Thyrocare had a network of about 4,500 service providers, comprised of TSPs, TAGs, OLCs, HVCs. This network covers more than 250 districts covering all the states within the country. Also, Company's wide spread network of authorized service providers has enabled the Company to expand the reach of the CPL, RPLs and ZPLs, thereby providing to a larger customer base.

Further, through its wholly owned subsidiary, Nueclear Healthcare Limited, it operates a network of molecular imaging centers in New Delhi, Navi Mumbai, Hyderabad, Central Mumbai, Western Mumbai, Nashik, Aurangabad and Bangalore, focused on early and effective cancer monitoring.

F) Operational Parameters of Thyrocare Technologies Ltd

i) Cost of Medicines & Consumables as % of Net Sales

Thyrocare Technologies coast of medicines as % of Net Sales

The overall Cost of material consumed/ traded as a % of Net Sales increased from 26.98% in FY20 to 33.08% in FY21

The increase was mainly on account of Covid-19 testing related reagents and consumables. The State Governments regulate the prices of Covid-19 tests.

ii) Revenue by Geography

West contributed 45% of reported revenue mainly on account of COVID-RTPCR, due to Nueclear Healthcare Limited, Goa and Municipal Corporation of Greater Mumbai business.

A tender was floated by Municipal Corporation of Greater Mumbai (the “MCGM”) for outsourcing of laboratory investigative services “Aapli Chikitsa”. Further, Company's Tender was accepted for the same in May 2019. Further, this contract is to be executed over the period of 4 years and its total cost is Rs 532.27 million.

iii) No. of Samples for FY21 and Revenue per sample

COVID RTPCR test prices were regulated by the government. Thus, even after increase in number of samples, the revenue growth per sample was restricted.

E) Comparison with Peers

Thyrocare Technologies comparison with peers

Revenue/Patient (in Rs)

Thyrocare Technologies revenue per patient

Revenue/Sample (in Rs)

Thyrocare Technologies revenue pet sample

Revenue Split - B2B and B2C

Thyrocare Technologies Revenue split

As on 31-Dec-20, the B2C contribution was 15% for Thyrocare Technologies Ltd

Test Split (FY20)

Thyrocare Technologies test split

G) Financial Parameters: Thyrocare Technologies

Thyrocare Technologies financial parameters

Revenue grew at 14% in FY21 from FY20. The PAT in FY21 was Rs 113.220 crore as compared to Rs 87.89 crore (29% increase YoY)

There was a 20% increase in diagnostics revenue. This was offset by 41% decrease in revenue from imaging services. Further, the increase in diagnostics revenue was primarily on account of revenue of Rs 118.30 crore from COVID-19 testing in Fiscal 2021.

Also, Thyrocare has shown strong growth in revenue and a steady net profit growth over the years. Revenue grew at CAGR 18% pa and PAT grew at CAGR 14% pa over 2012-2021.

The Group business generates cash from operations every year that is sufficient to manage the working capital and capital expenditure requirements.

Moreover, Thyrocare Technologies Ltd is Debt Free Company as on year ending 31-Mar-21.

For Half Year ended Sept-21:

  • Total reported revenue mainly consists of revenue from diagnostic services (98%).
  • Contribution of B2G (Government) in total reported revenue of 40%, increased significantly in
    the current quarter with Covid RTPCR testing for NHM, Municipal Corporation of Greater Mumbai, Goa.
  • Also, B2C revenue contributed 16% and B2B 44% of the Total Revenue

H) Management Outlook

  • Dr. A. Velumani, Mr A. Sundararaju and Ms Amruta Velumani resigned from the board of Thyrocare wef 02-Sept-21.
  • Also, in terms of diagnostic test the new management wants to make diagnosis, technologically advanced and transparent.
  • Further, the Management of the startup Pharmeasy now with Thyrocare, wants to provide lab and clinical testing to its bouquet of services.

I) Strengths & future outlook

i) Wide Range of Preventive and Wellness Tests Portfolio:

As of March 31, 2021, Thyrocare Technologies offered 279 tests and 79 profiles of tests to detect a number of disorders, including thyroid disorders, growth disorders, metabolism disorders, autoimmunity,
diabetes, anemia, cardiovascular disorders, infertility and various infectious diseases. Further, its profiles of tests include 34 profiles of tests administered under its “Aarogyam” brand. Aarogyam offers patients a suite of wellness and preventive health care tests.

ii) Tuberculosis testing by Thyrocare Technologies

Thyrocare’s initiative to launch tuberculosis testing through dedicated ‘Focus TB’ has already garnered volumes and it intends to expand footprints in other parts of the country by replicating its laboratory business model. Moreover, with government’s ambitious program to reduce TB in India, the management expects this segment to grow at 15-20% over the medium term.

iii) Tests offerings expansion

The company intends to expand its diagnostic test offerings through the acquisition of new technologies, including both instruments and processes. COVID RT-PCR testing and anti-body testing would continue to add to the topline until the COVID inflection subsides. Further, Thyrocare Technologies will continue to focus on volume growth of wellness and preventive offerings and expansion of its test offerings through aggressive price rationalization.

iv) Low-Cost Scalable Business Model of Thyrocare Technologies

The company works on a low-cost business. Management's focus is to to make wellness and preventive care affordable to clients/patients. Moreover, for Revenue the Company is focusing on volumes. Moreover, to remain competitive and boost volumes, the management undertook a strategic decision of reducing prices of its best-selling ‘Aarogyam’ packages. It is offering low testing rates across the spectrum of available tests.

v) Growth of Indian healthcare

Indian healthcare diagnostic industry is likely to grow by atleast 11- 13% p.a. in next five years, largely driven by increase in healthcare spending by aging population, rising income levels, rising awareness for preventive testing, advanced healthcare diagnostic tests offerings and healthcare measures introduced by stable government at central. Moreover, the government sponsored schemes like Ayushman Bharat which caters to the poorest income population will likely bring more patients under the ambit of health cover.

J) Weakness

High Competition

The domestic diagnostics industry is fragmented in India.

The industry is dominated by small and regional unorganized diagnostic laboratories, which controls more than 70% of the total diagnostic market. Although, according to industry estimates, the diagnostic market are anticipated to grow at 12-13%, with the general expectation that the organized chains would able to deliver growth at an even higher rate.

Further, in the organised market, Thyrocare directly competes with some major diagnostic players like SRL Diagnostics, Metropolis and Dr Lal Pathlab. Thus, high competitive intensity is likely to pose a risk to its high margin profile.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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